CompUSA 2015 Annual Report Download - page 20

Table of Contents
AlthoughtheCompanydoesnotexpect,basedoncurrentlyavailableinformation,thattheoutcomeinanyofthesematters,individuallyorcollectively,willhavea
materialadverseeffectonitsfinancialpositionorresultsofoperations,theultimateoutcomeisinherentlyunpredictable.Therefore,judgmentscouldberendered
orsettlementsentered,thatcouldadverselyaffecttheCompany’soperatingresultsorcashflowsinaparticularperiod.TheCompanyroutinelyassessesallofits
litigationandthreatenedlitigationastotheprobabilityofultimatelyincurringaliability,andrecordsitsbestestimateoftheultimatelossinsituationswhereit
assessesthelikelihoodoflossasprobableandestimable.Inthisregard,theCompanyestablishesaccrualestimatesforitsvariouslawsuits,claims,investigations
andproceedingswhenitisprobablethatanassethasbeenimpairedoraliabilityincurredatthedateofthefinancialstatementsandthelosscanbereasonably
estimated. At December 31, 2015 the Company has established accruals for certain of its various lawsuits, claims, investigations and proceedings based upon
estimatesofthemostlikelyoutcomeinarangeoflossortheminimumamountsinarangeoflossifnoamountwithinarangeisamorelikelyestimate.The
Company does not believe that at December 31, 2015 any reasonably possible losses in excess of the amounts accrued would be material to the financial
statements.
Following the previously reported independent investigation of Gilbert Fiorentino and Carl Fiorentino by our Audit Committee in 2011 (in response to a
whistleblowerreport)foravarietyofimproperacts,thesubsequentterminationoftheiremploymentandtheenteringintobyGilbertFiorentinoofasettlement
agreement with the Securities and Exchange Commission, on November 20, 2014 the United States Attorney’s Office (“USAO”) for the Southern District of
FloridaannouncedthatGilbertFiorentinoandCarlFiorentinohadbeenchargedwithmailfraud,wirefraudandmoneylaunderinginconnectionwithaschemeto
defraudTigerDirectandSystemax.Specifically,thechargessetforthaschemetoobtainkickbacksandotherbenefits,andtoconcealthisillicitincomefromthe
IRS,allwhileGilbertFiorentinoandCarlFiorentinowereemployedasseniorexecutivesattheCompany’sNorthAmericanTechnologyProductsbusiness.On
December2,2014,theUnitedStatesAttorney’sOfficeannouncedthatGilbertFiorentinoandCarlFiorentinohadpledguiltytovariouscharges,andonMarch3,
2015,GilbertFiorentinoandCarlFiorentinoweresentencedtosixtyandeightymonthsimprisonment,respectively.Followingcompletionoftheirsentences,each
istobe placedonsupervisedreleaseforaperiodofthirty-sixmonths.OnMarch1,2016,theUnitedStatesDistrictCourtfortheSouthernDistrictofFlorida
awardedtheCompanyapproximately$36millioninrestitutionfromGilbertandCarlFiorentino,whichtheCompanywillutilizeallavailablemeanstocollect.
TheCompany'sAuditCommittee,withtheassistanceofindependentoutsidecounsel,hasbeencooperatingwitharequestbytheUSAOthatitassisttheUSAO’s
investigationintoallegationsarisingfromtheFiorentinoinvestigationregardingpossibleexecutiveofficerconflictsofinterestandinternalcontrolsandbooksand
records violations.  The Company’s Audit Committee, along with the Audit Committee’s independent outside counsel, conducted an investigation of the
allegations and its counsel presented the Audit Committee’s findings to the USAO in July 2015.  The Company has been advised that the Audit Committee
investigation has found no evidence of executive officer conflicts of interest, and no material evidence of internal controls violations or books and records
violations.TheAuditCommitteeconsidersitsinvestigationtobeclosedatthistimeandtheCompanyhasbeenadvisedtherehasbeennofurthercontactfromthe
USAO.Notwithstanding,itisnotpossibleatthistimetopredictiforwhentheUSAOwillconcludeitsinvestigation;whatsubject(s)willbeinvestigated;what
actions, if any, may be taken by the government as a result of its investigation; or whether any of these matters will have a material adverse impact on the
Company.
Item 4. Mine Safety Disclosures.
Notapplicable.

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